The deceleration in real GDP growth in the first quarter reflected a deceleration in PCE, downturns in exports, in nonresidential fixed investment, and in state and local government spending, and a deceleration in residential fixed investment that were partly offset by a deceleration in imports and upturns in private inventory investment and in federal government spending.

Expectations were for the report to show the economy grew at an annualized pace of 1% in the first quarter, down from the 2.2% pace of growth seen in the final quarter of 2014.

The report also showed that the real price index fell 1.5% in Q1, while real personal consumption expenditures increased 1.9%, better than expected. This means, basically, that consumer spending increased more than economists had forecast during the first quarter.

Nonresidential fixed investment, or business spending, fell 3.4% in Q1 after a 4.7% increase in Q4, including investment in nonresidential structures declining by 23.1%. Real exports fell 7.2% in Q1 compared with a 4.5% increase in Q4.

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The decline in business spending is most likely a reflection of the decline in spending from energy companies, which have curtailed spending amid a sharp decline in oil prices since the summer. The decline in exports was most likely affected by the strong US dollar and the disruption at West Coast ports.

In a note to clients following the report, Paul Ashworth at Capital Economics wrote: "The 0.2% annualised gain will raise fears that the recovery is somehow coming off the rails but, just like last year, we anticipate a marked acceleration in growth over the remaining three quarters of this year. Over the past 12 months the economy has expanded by 3% and we would expect it to continue growing at around that pace this year too."

Ashworth said the decline in oil prices stunted mining investment, but said the cold winter in the Northeast did little to boost consumer spending to offset this decline.

This report comes at the start of a big day for the US economy, with the Federal Reserve set to release its latest policy decision at 2 p.m. ET.